Governments talk about limiting speculation in commodity markets due to high prices

High commodity prices have spurred some talks within western governments to limit the effect of speculation on prices. The Austrian finance minister Wilhelm Molterer has said that he's going to propose a Europe wide tax on speculative commodity trading. The US senate has also started to look at speculation in commodity trading and is thought to be looking at ways to set limits on speculative trading.

In commodities, speculation can be either long or short. But in resent years, the popularity of commodity index funds has increased the long only speculative trading, thus increasing the long pressure on the the market. With the high interest of these long only funds, the balance that has been in the commodity speculative trading has been offset to the long side.

With more than 40% increase in food prices in the last year, more than 30 countries have been seeing disturbance and even riots as a response to higher prices. Countries like Egypt, Cameroon and Haiti, that depend on food import have been seeing riots. This has worried some western governments as this could easily set about a chain reaction of disturbances that could be difficult to control.

High oil and food prices have begun to reach the levels that it could have a devastating effect on the economic status of many countries.

Liberal politicians have on the other hand pointed out that any forced control on the markets have often had worse effect than better on the situation. They claim that one of the reason for higher prices is the view that there will be a shortage of certain commodities in the future and the reaction to higher prices will be increased planting or lower demand, both of which will result in lower prices. The idea is that the market will take care of the prices by it self.